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EIA Natural Gas Market Summary - 1/22/2004


Natural gas spot prices increased 10 to 60 cents per MMBtu at nearly all major trading locations in the Lower 48 States as space-heating demand remained strong amid very cold temperatures in critical gas-consuming markets. However, elevated prices of $40 per MMBtu and more in the Northeast eased closer to historical norms over the course of the week following at least a temporary reprieve from the extreme cold in the region. For the week (Wednesday-Wednesday), prices at the Henry Hub increased $0.53 per MMBtu, or 9 percent, to $6.27. The price of the NYMEX futures contract for February delivery at the Henry Hub fell approximately 24 cents per MMBtu to settle Wednesday, January 21 at $6.150. Natural gas in storage was 2,258 Bcf as of Friday, January 16, which is 9.3 percent above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil increased $0.91 per barrel or about 2.6 percent since last Wednesday to trade yesterday at $35.53 per barrel or $6.13 per MMBtu.

After declining for much of the period from January 9 through January 16, prices at most trading locations surged on Tuesday, January 20, when traders returned to colder-than-expected weather following the Martin Luther King, Jr. holiday weekend. The upward pressure on spot prices continued through yesterday’s (January 21) trading session, resulting in net price increases of 5-10 percent in the Gulf Coast region compared with the previous Wednesday (January 14). The Henry Hub spot price has gained 87 cents per MMBtu, or 16 percent, in the past two trading days, and a net 53 cents per MMBtu since last Wednesday. In the Northeast, interstate pipelines continued to experience near-peak operating conditions through much of the week, although constraints appear to be easing (see Other Market/Industry Trends below). As a result, gas buyers resorting to the spot market in the region for incremental supply early in the week faced high prices. In New England, the spot price for delivery off the Algonquin Gas Transmission pipeline system was as high as $64.22 per MMBtu last Wednesday, but as restrictions have been relaxed it has fallen to trade in a $7-$8 range. On the week, the price off Tennessee Gas Pipeline in New England decreased $42.61 per MMBtu to trade at $7.17 yesterday. Price fluctuations were less severe in the Midwest, where the Chicago citygate price increased to $6.27 per MMBtu, a net change of $0.51 per MMBtu, or 8.8 percent, on the week.

At the NYMEX, the futures contract for February delivery lost $0.24 per MMBtu on the week to settle at $6.15 on January 21, owing to forecasted warmer weather as well as relatively high levels of natural gas in storage for this time of year. The daily settlement for the February contract on Thursday, January 15, settled at $5.845 per MMBtu after storage numbers for underground inventories were released. The Thursday closing price was the February contract’s lowest settlement since becoming the near-month contract on December 30, 2003. The March 2004 contract, which is currently the highest priced contract for this winter, closed yesterday, at $6.217 per MMBtu, down 28 cents on the week. Since the previous Wednesday (January 14), the 12-month strip, which is the average of futures prices for the coming year, dropped nearly 12 cents per MMBtu to $5.616.

Working gas in storage was 2,258 Bcf or 9.3 percent above the 5-year average as of January 16, according to EIA’s Weekly Natural Gas Storage Report. Implied net withdrawals were 156 Bcf, or about 5.5 percent less than the previous 5-year average withdrawal of 165 Bcf. Although this is the largest net withdrawal of the 2003-2004 winter to date, the withdrawal is 29 percent less than last year’s pull of 219 Bcf. In most regions outside of the Northeast, gas customer-weighted heating degree days (HDD), as measured by the National Weather Service, fell far below normal during the week. HDDs were 10 percent below normal in the high-gas-consuming East North Central Census Division, which includes Midwest cities such as Chicago. HDDs in the high-gas-consuming New England and Middle Atlantic Census Divisions were 33 and 25 percent above normal, respectively, which likely contributed to a relatively high net withdrawal of 115 Bcf in the Consuming East region. The prior 5-year average withdrawal for the region was 111 Bcf.

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